Research On The Financing Effect Of New Hualian’s Perpetual Debt From The Perspective Of Financial Leverage

In the context of the rapid development of China’s economy,enterprises are expanding their business landscape in accordance with their own development needs,and the demand for funds is increasing,but many enterprises are unable to achieve their development strategies and corporate goals due to insufficient funds in the process of development.Therefore,raising external funds has become an important way for enterprises to provide sufficient capital chains and solve the problem of insufficient funds.Currently,equity financing and ordinary bond financing are the most commonly used financing methods for enterprises,but both have different shortcomings.The market urgently needs new financing methods to broaden financing channels."The financing tool of perpetual bonds has to some extent made up for the shortcomings of equity financing and ordinary debt financing,which reduces the asset liability ratio of enterprises and prevents dilution of equity.Therefore,perpetual bond financing has been favored by enterprises,especially issuers with high asset liability ratios who hope to reduce their asset liability ratio by using perpetual bond financing.".In addition,issuers of perpetual bonds have a renewal option,which allows them to redeem or renew bonds at maturity based on their own financing costs,credit status,refinancing availability,and financial status.This article takes perpetual bonds as the research object to study the economic consequences of issuing and renewing perpetual bonds by enterprises,which has certain reference significance for enterprises to issue and renew perpetual bonds.During the research process,this article conducted a comprehensive interpretation of the behavior of a case company issuing perpetual bonds,using basic financial analysis methods,event research methods,and other methods to study the financial effects of issuing and renewing perpetual bonds.The main content of this article is as follows: The first part describes the current situation of sustainable bond issuance in China,and introduces the logic of enterprises using sustainable bond financing combined with relevant theories.The second part introduces the basic situation of Xin Hualian,including the financing situation of the issuer,the current situation,the issuance and redemption of existing perpetual bonds,and the term design and renewal arrangement of the bond "17 Xin hualian holdings MTN001" selected in this article.The third part uses basic financial analysis and economic value added analysis to analyze the financial effects of the issuance and renewal of " 17 Xin hualian holdings MTN001" by Xin Hualian,as well as a comparative analysis of Xin Hualian with similar scales in the same industry,but without issuing perpetual bonds.The fourth part analyzes the market reaction to the issuance and renewal of " 17 Xin hualian holdings MTN001" by Xin Hualian.Through research,this article draws the following conclusions: First,after the issuance of perpetual bonds,the asset liability ratio of Xin Hualian has further decreased,while there has been no dilution of equity.Moreover,cash flow has gradually increased,reducing the operational pressure of the enterprise,improving profitability,and accelerating the progress of project investment and construction.Second,the renewal of perpetual bonds may lead to an increase in the coupon rate of the bonds and increase interest expenses,but it can reduce the pressure that enterprises may face on centralized payment when their financial health is low,and help them overcome the bottleneck period.However,from the perspective of market reaction,although renewal has a positive effect on the cumulative yield of enterprises,investors still present a negative attitude towards this event.